Andrew: Hey there, freedom fighters. My name is Andrew Warner. I’m the founder of Mixergy where I interview entrepreneurs about how they built their businesses. I’m about to interview a New Yorker who understands that I just ripped through my company name so fast that he might not have even heard it.
Joining me is an entrepreneur who through a few different changes recognize the problem that we all do, which is that advertising kind of sucks online. People have ad blockers because ads are distracting waste of space that aren’t usually helpful. Publishers aren’t in love with ads because they just pollute the site and they don’t add much value. And so into this situation, he stepped in and said, “You know what? What if we don’t just run banner ads? What if a way to stand out in a world of Facebook ads, in a world of Google with their text links, what if what instead we do is offer a quiz or offer something like a poll or something that gets people a little bit more engaged and through that they could discover the advertisers who are paying to sponsor?”
And that’s the idea that’s worked for him. He says that his ads will actually run even if somebody has an ad blocker engaged. And after failing with a previous idea, this business is actually taking off really fast. I invited him here to talk about how he did it. His name is Zack Dugow. He is the co-founder . . . actually, the founder of Insticator. They help companies increase revenue and engagement. Publishers, excuse me, increase . . . You know what? I’m not going to read that sentence. I feel like I described it really well. You gave me a great one sentence, but it was full of a lot of different, like, benefits and I want people to understand the benefits as they talk to you. What do you think of that, Zack?
Zack: I think that sounds great.
Andrew: I’m glad that you don’t think of me as a jerk for deleting this whole sentence that we worked on before we started.
Zack: No problem.
Andrew: This interview was sponsored by two phenomenal companies who keep telling me what to say and then they keep smiling as I adjust it because the ads are working for them. The first will do your email marketing right. It’s called ActiveCampaign. I can’t recommend them enough. And the second, if you’re looking to host any kind of content online, you should check out HostGator. And in the ad that I do for them later, I’ll ask Zack what kind of content he thinks people should create if they have a HostGator account. But first, Zack, welcome.
Zack: Oh, great to be here, Andrew.
Andrew: What’s the revenue of the business? Give us a sense of how big you guys are.
Zack: Sure. So in 2017, we did 2.8 million, last year we did 8.9, and this year we’re tracking between 17 million and 25 million, so we’ll probably fall about 20 million.
Andrew: Wow. And how much of that is money that you’re holding and then have to pass on to publishers?
Zack: So, it really varies per deal, but figure between all of our different products from their revenue engagement side and publishing side, data, direct media, so on, figure it’s like 50% diversity.
Andrew: So, half of that you keep and then you used to pay for your people, used to grow the business.
Andrew: You had a previous idea. What was that? A previous company that you sold. What was that company?
Zack: So, the company beforehand called RedRush. That company we did events and internet ticketing sponsored by liquor companies in New York, and Vegas, and Florida. So, it was more of like a hybrid services/startup. A little bit like a pre-Eventbrite before Eventbrite was really big. And, yeah. It grew to about 25 people and sold that business around 2011, 2012.
Andrew: To JE Incorporated.
Andrew: So, it was liquor, it was bars that would use you or is it someone who wanted to organize an event in a bar?
Zack: So, think of it like we worked with all these different bars and nightclubs and venues and what we would do is we’d have a sponsor like Heineken USA. You’re like, “Cool. I want to get a lot of exposure for my specific brand, for my specific drink. I want to create, like, this very cool ticketed special event for Fridays at insert venue name here.” And then what we would do is we would have like a whole promotional team that would promote it. If people were buying tickets for that, we would supply that. And then we would set up a situation and a deal so that there was revenue generated from the ticket sales, from the bar, and this liquor sponsor would get X amount of exposure to, say, 1,000 people, 5,000 people, 10,000 people depending on what the deal was and the venue and the sponsorship.
Andrew: How well did that go for you?
Zack: It went really well. I mean, it was a . . . It’s a market that was not a huge market, so figure that’s under $1 billion market. It was always going to be much more of a services business the way we were executing it, like, a technology business. It was great in that I think I learned a lot of really hard business lessons in that I started that company with a partner. I had a really awful experience with that partner. I didn’t do my due diligence on this person, made a lot of ton of mistakes. And so I think what was great about it was more that I learned a lot of important business lessons through challenges and mistakes, and those have been very helpful later on in my career.
Andrew: What was the issue with the partner?
Zack: He was a . . . Let’s just say he didn’t have the strongest, like, moral authority as it relates to partnership and how he spends his time and a lot of things like that.
Andrew: You mean he was working on other projects instead of or just not doing the work?
Zack: Yeah, both of those things.
Zack: And also just like, he just really wasn’t very trustworthy. It was hard to get like, the truth is related to certain numbers. And that was, frankly, my fault for like, jumping into bed in a partnership with somebody that I didn’t, like, have really fully vetted as much as I should have.
Andrew: What drew you to him then?
Zack: Well, I started this business outside after college and I was young and more inexperienced at the time and he was about 10 years older, had a lot of experience in that industry and I thought, “Oh, here’s somebody I can learn from. He’s really gregarious. Yes, he seems like he has really good relationships.” So, I kind of dove in headfirst as opposed to being like, “Well, is this somebody who would be a good partner? Is this somebody who, like, we have a lot of shared core values as a bit like relates to life and business?” So, yeah.
Andrew: What I think you were doing was I thought you’re right out of school and you’re thinking, “How do we find a way to hang out and also make money from it?” Party and profit. Was that it at all?
Zack: No. That’s a really interesting thing because that’s like what you would think, but it was so much more about like, profit than it was party. Like, I never really . . . I’m not a big drinker. I never got into that. I was really . . . It’s so funny because if you talk to the people in that industry, 90% of the people in that industry . . . And funny enough, some very successful tech, other tech entrepreneurs come from that industry and we all kind of know each other. But if you talk to people in that industry, 90% started because they’re like, “Oh, yeah, I want to party and profit.” But they will always regard me as somebody who’s like, “No. Zack was always about just the business side,” as opposed to like, “Oh, man, let’s go have a really good time.” So, that was always like an interesting, I think, that was a bit of my MO at the time.
Andrew: Yeah, you grew up in New York in Manhattan. I grew up in Queens. I always wanted to move to Manhattan and as soon as I made a little bit of money I moved right into the city. I thought the city was going to be this cool place where people who grew up there did really cool things. You were playing Magic the Gathering. You did that in Queens. What was it about Magic the Gathering?
Zack: So, Andrew, to be honest, I was a very cool guy, I was playing Magic the Gathering and Warcraft and Starcraft. So, I was so popular. It was . . . I had to keep people away with a stick. But yeah, I love Magic the Gathering. Like, I love strategy. I love the strategy game around that. So, I had this very cool mana producing deck. I don’t know if you’re familiar with Magic the Gathering but . . .
Zack: All right. So, I’ll save the readers the . . . or the save reviewers that experience. But definitely, I was into Magic the Gathering and Warcraft and Starcraft.
Andrew: Wow. You know what? And I’m looking at earlier versions of your website, redrushnyc.com is what it was called. It’s like a woman wearing like, practically nothing on there for parties. I go, “And this guy must be partying all the time.” No, you’re probably the guy who came up with the idea of let’s add corporate events on there. And there’s a guy in a tie on that section of the site. All right. How did you do with the sale? It doesn’t seem like it was like a big windfall, but it was a good exit or an exit.
Zack: Yeah, it was a good exit. It was a good exit relative to the size of that business. So, this is not the kind of exit where it was like, “Oh, I’m going to go retire.” This was like the exit where I was like, “Oh, I’m going to take these resources and invest them into something else, into my next business,” which I did. I took a large percentage of the money I made from that.
Andrew: How much money did you get from it? Give us a ballpark.
Zack: Hundreds of thousands of dollars, not millions of dollars.
Andrew: Perfect. That’s a nice exit considering what you were doing. You really didn’t . . . I’m looking at the site. It’s not a scalable operation. I could go from a dropdown menu, pick the DJ who’s going to entertain my . . . Yeah. Okay. That’s impressive. So, then the idea for Insticator came from “Mad Men”? How?
Zack: I was watching “Mad Men” . . . So, what we do now is different from what we did initially. But I was watching “Mad Men” and I was with a bunch of friends, and we were making a bet about Don Draper’s relationship like, was he going to get divorced? And it just occurred to me, wow, people have such a strong relationship with characters on TV shows from “The Sopranos” to “Mad Men” and now it’s like “Game of Thrones,” right? And so I was like, “These parasocial relationships, this builds community, right?”
Like, I can know nothing about you, Andrew, but if we both like “Mad Men” or we both like “Game of Thrones,” boom, we’re like instant friends talking about Jon Snow or whatever character. And so that was the initial idea for Insticator was like a website where people could predict outcomes of TV shows and sporting events and it was going to be ad supported and monetized through advertising and data, except for when we launched it . . . And we actually had a little bit of like, good initial traction. And believe it or not, our two very first very successful TV show communities was Vampire Diaries online and “The Originals.” So, if you were not a 13-year-old girl, you might not be that target audience.
So we had this super-engaged audience for these predictions, but we found we really need to go where the fans were. So, we changed the frontend of our tech and then tested it out and embedded it into a site and we were like, “Oh, wow.” Cheesehead TV was one of our first sites, it was a football fan community about the Green Bay Packers. And wow, we can really increase engagement for this and we saw a great results. And then one site became 10 sites became 50 sites and so on, and that quickly became the focus of our business was . . .
Andrew: Wait, Zack. Because you were saying, “Instead of having people come to our site, insticator.com, why don’t we just go take our content and put it on other people’s sites?”
Andrew: Oh. You know what? I’m looking at an early version of the website. I see Daenerys Targaryen from . . .
Zack: “Game of Thrones.”
Andrew: “Game of Thrones,” you’re just mentioning it. I see it. “Watch your favorite show, predict who you think, what you think will happen on Insticator and then win prizes for your prediction.” Super simple. Makes sense. I could understand why people in the world today are not looking to go to another website, but if they’re on the site already, you’re going in there. That worked. And were you then . . . Well, then what happened next? Why didn’t you stick with that?
Zack: No, that is what we do. So, what we do is our embed, so on our publishing products, we have trivia and polling and a suite of engagement tools that engage the audience, for all different types of sites, from news to sports, to TV shows, all different content verticals in many languages. And we engage those audiences, collect data on them, target with advertising, we make money for the publisher, generate audience insights for them and build a better reader experience and better brand experience.
Andrew: But you move beyond . . . Once you got your predictions on other people’s sites, that widget. At that point, did you start selling ads and seeing that the revenue was coming in?
Zack: Yeah. So, we thought . . . Well, it was like the initial product itself didn’t have the advertising. We found we wanted to find a way that we can increase monetization for the publishers as well and that helped us get more exposure on the site as well.
Andrew: They weren’t willing to just let you be on, you needed to find a way to get money for them. By the way, you said to our producer, “One of the big mistakes, one of the biggest waste of time was creating a business plan.” What was in the business plan and what would you have done instead?
Zack: The business plan was such a waste of time. It was so ridiculous. I remember I called up my dad and I was like, “Hey, I want to launch this business, but this one is going to be investor funded versus prior business.” Like, “What do you think?” “Oh, you really need a business plan.” I called a bunch of friends I was talking and thinking about it. And I had contracted this consulting firm, Cayenne, and wasted a lot of money putting this like, 80-page business plan together, how we’re going to scale, how we’re going to monetize, how we’re going to do this, how we’re going to do this, financial projections. It was all completely irrelevant. Like, what we should have had is like one page, like one page, like, “This is who we are. Here’s why it’s useful. Here’s why we’re going to win.” And like that would have been far more useful than my irrelevant 80-page business plan.
Andrew: Was anything useful, anything helpful about having done all that? You were a mentor at NYU, I read. I went to NYU business class. I remember they told us to write a business plan, which we did. It was the . . . But it was kind of helpful to be forced to put together financial projections to think through how the mechanics of the business model worked. Was there anything for you that was helpful?
Zack: So, that was . . . I would say 5% of 10% of business plan and maybe that stuff. Like, the discipline of at least having a structure and, yeah, you’re going to change a lot. So, maybe that part was probably useful, but like 90% of it we could have saved time on.
Andrew: Okay. And then the first version who built that for you?
Zack: So, we hired an engineer right out of the gate with some of the first initial money that we’ve raised and money I’d put into the business and helped us build the first version of Insticator, which was the Insticator website, which our first version was really awful. It was pretty bad. It did not work.
Andrew: What was bad about it? I’m on the site right now. Again, Internet Archive coming to the rescue. What was it that was bad about it as you look back on that first version?
Zack: Well, the first version, we didn’t really account for a CDN properly loading images and having them scale to the right sizes, and so things didn’t look as professional and sharp and there was a bunch of code issue. Like, there was a lot of things that were challenging about I think the first couple of versions of the website.
Andrew: Okay. The thing that stands out for me was, at least from what I can see in the Internet Archive, it wasn’t super sticky, like, I couldn’t connect and then be brought back in some way. Is that right?
Zack: Yeah, that’s right. I mean, we added some features in the B2C experience of emailing people the results that are predictions and finding ways to try to trigger to pull them back in. But like, for the most part we did not build a super sticky B2C product from the get-go.
Andrew: Okay. Then you started to put your ads . . . you put ads into the platform. Where’d you get the first ads?
Zack: The first ads actually came from a company called LiveRail which Facebook ended up buying, which had video ads. And so the first ads we connect were actually video ads into our embed on to other sites.
Andrew: You told our producer, it was LiveRail that got your first penny and a half. We always ask people, “Where did you get your first dollar?” you said, “That’s my first penny and a half that came in from that.”
Zack: And we were so excited about that, by the way. We were like, singing and dancing for a penny because it was like, “Oh, man, we had validated this thing.” But like, I don’t know if that really counts as validation in hindsight.
Andrew: And people found you because you went on Reddit and social media and did what?
Zack: So, we were posting a lot of our content right into Reddit and just like posting that in for different, like, whatever section it made sense for like the TV show “Arrow,” going to that in Reddit and posting in our links and trying to get people engaged and going to StumbleUpon and stuff like that. So we were like . . . “We don’t have a lot of money. How can we get ourselves some organic exposure?” And that was a bit of what we focused on.
Andrew: And how effective was that for you guys?
Zack: Actually Reddit was not bad. Reddit was pretty decent in that it got us a lot of initial engagement. So, I just remember at some point, it was like super manual processes and some point we started focusing on other channels. But at the time, it was . . . I think Reddit obviously had a different . . . This goes back a number of years. Had a different interface and different process. But yeah, it was pretty useful for us.
Andrew: Yeah. I went back in time to try to figure out what you guys were doing there and I saw under a post, “Is anyone else sick of all the fighting on RHONJ?” It’s a bit ridiculous. That is a Bravo Real Housewives sub-Reddit. And I guess there’s a link there to your site. And that’s the kind of stuff that you were doing to try to bring people in. That was working for you. The advertising, you were selling yourself. Beyond LiveRail, what other ads were you doing? What were you doing as the one and only salesperson for a while?
Zack: Well, I was focused on two sides of the business. I was focused on getting publishers to embed our code in and getting advertisers. And so I focused on getting these exchanges. And so OpenX, which is a big platform that we still work with today. We got them on board and then we started adding others. It’s kind of like a chicken and the egg thing. It’s kind of like we had to convince these different SSPs that it made sense to work with us and we’re like, “Well, if you have a lot of these sites, then we’ll work with you. If you have a lot of exposure, then we’ll work with you.” And so in the very early days was very chicken and the egg type of experience.
Andrew: All right. I’m going to talk about my first sponsor and then get back into what happened with this business. First sponsor is a company called ActiveCampaign. Do you know them, Zack?
Zack: I’ve heard of them. I don’t know them super well.
Andrew: What do you guys use for email marketing?
Zack: Right now we use Playdio, I think it’s what’s called.
Andrew: Playdio. I never heard of them. I feel like the decision to pick the right email marketing software is super important because, yes, you could move your email list to somewhere else, but, man, is it a pain in the butt to do it. And so you want to pick a company that could do everything you need, but also be organized and clean enough that you can actually use it.
So, the thing that ActiveCampaign says is, you want to send people different messages, Zack, based on what they’re doing on your site. Like you guys have both publishers and advertisers. Imagine that based on what I’m looking at on your site, which articles I’m reading, which page is on your site, you can tell I’m a publisher. I’m trying to figure out whether you guys make sense. You don’t have to have me fill out a form. You just see what I’m doing on the site to know that I’m a publisher. You might then email me and say, “Andrew, here five reasons why publishers use our software.” And then another day might be, “Here are five reasons why publishers are reluctant to use our software and our responses to it,” and so on.
If you see that I am looking constantly at the sponsorship section, you might talk about how I could buy and you don’t need me to fill out a form to know basic things like that. You watch what I’m doing on your site and they’ll give you a pixel that you can put on the side a little bit of cold, actually, not pixel necessarily. And they’ll let you track based on what people are clicking.
If you’re interested in that, Zack, or any email marketing software . . . What I’m doing? That or anything else. If you’re interested in that, if you’re looking for that kind of customization without having people fill out forms, just go to activecampaign.com/mixergy. When you do, they’re going to take away a lot of the headaches of using email marketing software. Number one, they’re going to let you use their software for free. Number two, if you sign up and pay, the second month is free. Number three, they will give you a consultation even you, Zack, actually, probably someone on your team at this point. You’re a pretty big company. Give you free consultation and make sure you know all the features and get to use them. And finally, if you did use a different email marketing company, they will migrate you for free. That is activecampaign.com/mixergy.
The reason they don’t like that I call them an email marketing company is they do so much more SMS and other ads also, but they do it all in an automated way and that just works beautifully.
Zack: That actually sounds really interesting because especially we see a lot on how can we personalize things more. So, that’s actually really relevant. So, we should definitely . . . We will take a look at that.
Andrew: You can even see like, if somebody keeps clicking and watching a video all the way to the end, you can trigger a follow-up message, right? Like, if they’re interested in the new trivia feature, you just come back. All right. I could talk about that endlessly. We’re not selling that. We’re talking about your business. At what point did you say, “All right, we’ve got to give up on our original premise and just shift to this new thing that we discovered”?
Zack: That was actually a really tough decision to make, especially because my team at the time didn’t necessarily agree and were like, “Well, we’re seemed to be getting decent traction here. Why don’t we keep focus on this?” And I just really didn’t see like the long-term scalability of that or the long-term success of then, the direction we were going. So, we started doing both, and then when it became clear that we were getting a lot more engagement through our embeds and there was monetization coming through there, and that was really resonating, it became like a no-brainer. I was like, “Yep, we’ve spent the last year and a half working on this, but we’re going to put that aside. Startups going to throw out 70% of their code base anyways and we’re going to focus on what makes sense and what’s driving business for us.”
Andrew: You had this interesting link on the bottom of your site that I don’t usually see on sites. It was the advisor’s link. Why were you talking about Elias Roman and Selig Zises on your site? Why was that important? I see you smiling in recognition. What’s going on?
Zack: I love this archive feature you have, Andrew. It’s like [inaudible 00:20:54] like, “Why did you do that six years ago?” I like it. It’s good. I think when I was . . . So, when I started the company it was one of those things where I didn’t have any co-founders and I wanted to add extra layers of validation to that and I was like, “Okay, great. What’s one way I can do that?” It’s bring in advisors and people who have certain levels of expertise in different areas that can help the business. And so that’s kind of why I listed out the advisors at that time was more like, okay, people could see and be like, “Oh, wow. There’s so many other . . . There’s additional interesting people working on this.
Andrew: I was sensing that maybe you were thinking that you aren’t enough at the time. And still, it was largely your sheer will, it feels like, that was doing. In fact, you told our producer, “It was truly willpower that got us going in the beginning when it comes to ads.” What did you mean by that?
Zack: Well, we didn’t have . . . And so just to your first point. Yeah, there probably was something to that. A lot of companies starting out, I was like, “Okay.” I’m going and I’m presenting these different startup pitches and there’s three co-founders and each one has 20 years of experience in the industry. And I’m here as a solo founder and I didn’t have super relevant experience for my industry. Yeah, a little bit on the brand side, but not like on the programmatic or a lot of what we do today. So, there was definitely a bit of that. I’m sorry, I forgot the second part of your question.
Andrew: Where was the willpower? How did that play a role in either getting publishers or getting ad networks?
Zack: Well, in the beginning, there was not . . . When you’re first starting out . . . When we were starting out, we didn’t have any real like critical mass or traction, and these are things like getting ad network or getting supply-side platforms or ad networks on board happens when you have like much more critical mass and it’s a chicken and the egg thing, and same thing with publishers, you have to be able to drive in value.
We didn’t have a comprehensive case study to be like, “Oh, look, I can prove to you because I’ve done this for [inaudible 00:22:51] that we’ve increased revenue 80%. So, it was very much like a lot of no’s before we got yeses and it was very much like, “You got to just take . . . You got to trust us on this. There’s a lot of great value here. We’re going to get this going.” And so that’s when we . . . That was a lot of hard convincing in the early days when you don’t have a lot of empirical data to back up your claims.
Andrew: And so when you did that, how would you do it? What was your process for convincing people to work with you?
Zack: God. I feel like I want to say . . . It’s like big speech. A lot of that is . . . I feel like almost I was selling them on me. I was selling them on me, “Zack Dugow, I’m going to make this happen.” So to the ad networks, “I’m going to get . . . Even though I have four sites, I’m going to get 100 sites and 100 million people on these. You got to believe me.” Right? Like, super passionate, super energized. And then the same thing with the publisher site. “We’re going to drive a lot of value here. We’re going to get a lot of advertising campaigns.” And just, I was able to get people to believe that, and then it just became like its own self-fulfilling prophecy.
And really I appreciate all those early customers because they took a chance on us and I’m really happy it worked out, but that was like, not an easy call to make, right? If somebody could go to their boss and be like, “Hey, so we should work with these guys. The founder seems like a really engaged guy.” It’s not like their boss would be like, “Oh, wow, that sounds like a sound business decision,” but that’s really what it was at the time.
Andrew: You know what? I did find one of maybe . . . one of your first case studies, maybe your very first one, you were talking about how you helped this jewelry company take their Twitter account from 30 followers to 636 followers in 10 days, which is not insignificant, but I can see what you’re trying to do. You’re trying, as I’m watching this site evolve, trying to both get people to your site and trying to show that what you’re building is actually working.
The part about trying to get people to your site I feel came from . . . And I noticed that you were even doing live chats and you were looking for community organizers to do live chats about TV shows that they care about. In this whole thing as you were doing this, I’m watching the struggle it’s like for refinement. But I know how it plays out, and so it all makes sense to me. At the time, did you feel like, “What am I doing here? I got all these people in this 250 square foot room building this up, I got nothing but a few partners in a jewelry company with 30 followers. What am I doing?” Did you feel that at all?
Zack: God. It’s in a hindsight, like, I objectively looking at . . . I’d be like, “Oh, wow. I should have been asking myself that question.” I don’t know if I put blinders on, but I very much was much more of be like, “I’m going to make it happen no matter what. I will bleed and die to make my company successful.” And it’s like, I merged who I was or who I am with my business. And so it was like entertaining the idea of like, “Is this going to work?” Wouldn’t even cross my mind. It was kind of like [inaudible 00:25:49] who probably at times are like, “Wow, this person is really annoying.” I imagine it’s like what a Jehovah’s Witnesses looks like. Like, this person is really drinking the Kool-Aid and I don’t know why. No offense to Jehovah’s Witnesses, but yeah, that was probably very similar to exactly the way that I was. It was like, “No, I’m going to make it happen,” and it was like . . . and like, “If you don’t believe me, watch me. I’m going to make this happen.”
Andrew: We’ll talk about hiring and having a team, but do you remember when you were doing it yourself, who your first big publisher or advertiser . . . I guess it would be publisher. Who was the first big publisher that you were really rocked out to get?
Zack: Well, I mean, big is all relative and they’re a customer, a publisher of ours now but I remember Elite Prospects which was like this big hockey site and they were the first site they were doing like $60 to $70 a day with us which was like a huge deal. And Elite Prospects is like a site with a good amount of traffic from this great company called [News Me 00:26:46] that does . . . has all like, the top junior hockey players in the world. And we were like, super jazzed because that like, tripled our traffic overnight when we started working with them. So, I was like, super pumped. I was more pumped about that I think then when we signed up, like, ancestry.com and WebMD and a lot of other like brand name pubs that we work with today.
Andrew: Because you needed them so much at the time. And you know what? I’m on one of their sites right now. There was on the homepage, there was a list of confirmed transfers. So, it’s I guess, hockey players going from one place MHK Humenné to Dina . . . Basically, I have no idea what they’re talking . . . who they are. That’s how niche this is. And when I clicked on one of the players, I could see on the lower left . . . Oh, it just changed. But a moment ago, I saw I guess what looked like a quiz. And I do have ad blocker on this computer and you guys did show up. I think I need to refresh to bring it back. I shouldn’t have hit back and forward.
That’s the idea. That’s what you guys are doing now and it has nothing to do with TV shows. Oh, there it is. Elite Hockey Prospects. The Bruins’ “spoked B” as a reference to which of Boston’s nicknames, Beantown, the city on the hill, the hub, Athens of America. I’m going to say Beantown. Let’s see. Boom. Sixty-nine percent said Beantown. And I was wrong, it’s the hub. And this is sponsored by, I guess, somehow connected to Amazon here. That’s what we’re looking at. This is your ad.
Zack: Yeah, that’s our embed experience plus advertising and connected to it. Yeah.
Andrew: Got it. All right. I can barely even see what the ad is. Okay. Let’s talk about going beyond you. How did you hire beyond yourself? What was your original hiring process?
Zack: We had a really terrible hiring process in the beginning. So, in the . . .
Andrew: What was it?
Zack: It was, “Come on in. Sit down with me and the other two members of the team. And we’re just going to ask you a bunch of questions about your experience and what you want to do. And if we felt like there was a really good vibe, fantastic, great, you’re in. We’re going to make an offer.” So, our hiring process was really bad at the time and it’s certainly evolved a lot since then than kind of like what we do today. But yeah, our hiring process was like very, like, quick and it was really a focus on skill set, which turned out to be a big mistake for us. And we did a big turn and 180 on that about a year and a half, two years ago and that’s really helped our business succeed a lot.
Andrew: What do you mean? You were looking for what kind of person back then?
Zack: Well, I guess what I mean is depending on the role. So, we were interviewing somebody based if they were an engineer on their engineering skills, if they were salesperson, their sales skills, but we didn’t build and really have core values as a business. It wasn’t like, “Here are the things that make us special and these are the things that we’re looking for in people and that kind of connect us and here’s our kind of core purpose.” And since we started focusing on that as a company, that helps us be very successful and find talent that really shares our vision and works well within our environment and shares the same values.
Andrew: Give an example of somebody who it didn’t work out with back then before you did.
Zack: Okay. And why it didn’t work out or you’re just like . . .
Andrew: Yeah. What was going on? I’ll actually tell you, here’s what I’m looking at. If I seem a little distracted as we’re talking, I’m constantly researching everything. So, I went to Glassdoor where you guys have a really high rating now, but I went back in time to see what was going on. You’re smiling. You get a sense of where I’m going.
Zack: No, I just like your interview style.
Andrew: Oh, I love it.
Zack: There’s [dig 00:30:20] writing and like all thought thrown in there.
Andrew: This person said, “Sweatshop! Disgusting how the CEO treats employees.” The pros. This is from 2014, so we’re looking at the early, early days of the business. “The company seems to be heading nowhere,” which obviously didn’t pan out. “Things get done so slowly and the company never grows. Good concept but horrible execution. You can tell the CEO has not done any market research before launching the company.” Little does he know he did a lot. “And just felt like spending some of daddy’s money to keep ego alive. CEO only hires foreign workers, Chinese and Indian as developers to dramatically underpay them in exchange for H1 visa support. CEO asks developers to have their master’s degree, meanwhile, pays them like they have high school diplomas.” Any of this . . . What are you feeling as you’re saying this? Like, do you want to punch me in the face? Like, you’re . . .
Zack: Well, first, I want to thank you for finding that review.
Andrew: What was going on back then?
Zack: Yeah. So, a couple of things. So, the part about like not being paid well, part of that I agree with, we certainly didn’t pay well. We didn’t have the resources to pay well. But I also kind of thought, “Well, why did those people accept the role?” Like, it was clear what we were offering, right? So, it’s one thing to be like, “I’m going to accept this role for the amount of money that’s being offered and then I’m going to really complain about.” Why not just not accept the role and like, take a different role?
But to all the stuff you spoke about there. So, we certainly didn’t pay well. We didn’t have a good culture then. We worked people really hard at the time. I was probably working six or seven days a week. We asked people to stay late. This goes back to the early days where we were like . . . It was very much, I think, “Let’s try to push as hard as we can to get some traction because we’re running out of money or we don’t have any and I’m putting in every dollar I made from my prior company sale and it’s a really stressful chaotic time and we’re trying to do whatever we can to get enough traction to close additional funding.” So, in that environment, yeah, there was definitely that, like, aside from the daddy’s money part. There was no daddy there. But yeah, it was certainly a challenging early days.
Andrew: And so you were really pushing people to stay ’till 7:00 and someone wanted to leave at 5:00. Was it an uncomfortable culture to leave at 5:00 or was it Zack saying, “Hey, I need you to get this done. This is the next big thing. I believe in this advertising thing. Let’s do it”? What was your approach?
Zack: So, it was very much, “Hey, we’ve got this deadline to try to get this in for this code release, and if we get this in for this code release, maybe we can get this customer, maybe that can help us close the investment round.” It wasn’t like, “You need to stay till 7:00.” It was more like, we had so many things to do and so few people to do them. And out of the five people we had it was like every person was essential. So, it was really stressful. It was stressful because we’re raising money and things where the goalpost is being moved . . . It was like, being moved. It was like, “Well, if you can get to this, then we’ll be interested.” And we got so many more no’s before we got yeses, so it was like, I was really trying to push the team and myself to get enough done to where we could close in that financing so we could hire more people, pay people better do all those things.
Andrew: How did you get through that difficult period for yourself? I mean, if you’re being that way, it’s because you feel a sense of desperation. What did you do to keep yourself going and to keep from collapsing?
Zack: Yeah. I was certainly not . . . I got to say, I was not a pleasant person to be around. I have to give a lot of credit to my ex-girlfriend because I was working all the time, and then when I wasn’t working I certainly wasn’t in a pleasant mood, because it was like, I . . . And so I paid myself nothing in the business for three and a half or four years and I was using my savings to put into the business but also to feed myself. So, it was a really challenging and stressful time, and I got to say, friends and family just try to rely on as much of that as possible as a stress reliever, but I was certainly stressed out all the time.
Andrew: All right, 2014 was tough. We’ll talk about that in a moment and then also how you got out of it. But first, I’ll talk about my second sponsor, it’s HostGator. Let me ask you this, Zack. In a world where there’s tons of websites, if you had nothing but a hosting package from HostGator, say, and you could create a content site today and monetize it, what would you do to get yourself going? What do you recommend having seen so many content sites, so many monetization strategies? What do you recommend if somebody’s listening to us?
Zack: So, if I’m using HostGator on my site and just get it going, right?
Andrew: Yeah. I say, “You know what? Zack’s got nothing. He wants to be an entrepreneur. I give him a hosting package and pat on the back and he has to go.” What would you create today knowing what you know?
Zack: First, I would probably throw up a WordPress site and pick out a cool WordPress template. And then I would pick out a specific type of content that like, really speaks to me because I think on the internet there’s so much bullshit that’s not authentic. So, I’ll pick out something that’s authentic to me. So, for me, I love talking about business, I like talking about investing. I like talking about family divorce. And then I would make sure I’m pushing out at least one or two articles a day so that I’m starting to make rank in SEO and start getting some traction there. And what’s great about the internet today, is with a HostGator account and with something like WordPress, like, within a day you can have a website up and running.
Andrew: And you would do something about divorce? And if you did it about divorce, it would just be understand how to divorce or how to deal with divorce or what?
Zack: No. I’m sorry. Yeah, I should elaborate. No, not how to deal with divorce. I guess like, children of divorce, how to be a good parent during the experiences of divorce, that type of thing.
Andrew: By the way, what makes you say that? That’s kind of a random thing and very specific.
Andrew: Be open.
Zack: Yeah. I think my parents who are wonderful people, and I’m sure will listen to this at some point and say, “Zack, why did you go there?” But my parents, I think, are really smart and really talented and really caring people and just, they had a really tough time in their divorce and their separation and me and my brother were collateral damage as a result of that. And I think I always look back at my childhood and think, “Okay. Well, if I was a parent now, or what could my parents . . . What could have been shown to them that they could have done differently so it would have been much easier for them as people and for me and my brother?” And so . . .
Andrew: Give me an example of what they did that was tough for you and then what you would do differently today. And I should say, by the way, for anyone who wants to go do this or anything else go to hostgator.com/mixergy and I’m grateful to them for sponsoring this type of personal conversation. Yeah. What did they do specifically?
Zack: Sure. I think the biggest thing is when somebody . . . Like, whenever my dad or my mom when they were frustrated about the other person, they would voice that concern. They would be like, “Hey, I’m really frustrated about this or this.” And there was a ton of different things. And it’s kind of like, somebody could be a bad husband or wife, it doesn’t mean they’re bad parents, and it puts the kids in a situation where they feel like they have to defend one parent to the other and it’s very challenging for children.
Andrew: Okay. I get that. Actually, I could see sometimes when I’m angry with my wife, like, visualizing into the future we’re divorced and then also how do I not tell them that this is the thing that’s bothering me. By the way, when I did a search . . . You know I keep searching for stuff. For your name and divorce, it comes up with “Are Zach and Jenna from “The Challenge” still dating in 2017?” Who’s Jenna? Why is she so famous that people are asking about you guys?
Zack: That’s not me.
Andrew: Okay. It’s a different. It says, “Zack Dugow talks tech at . . . ” I don’t know what that means. All right. It seems like maybe a computer wrote this. Wow. So, then 2014. I want to go a little deeper into this pain of 2014 which I know is a downer, you don’t want to go too deep into pain, and then talk about also how you got out of it. You told our producer, “This was really a tough year. We almost ran out of cash.” You had to put more of your own money in. You cut 30% of people’s salaries, and you only had five people at a time. And you had a conversation with someone who wanted to bring his mom from China. What was that conversation?
Zack: Yeah. So, that was a really tough time. I had to cut our team salaries by 30% and essentially, a member of the team said, “Hey, Zack, because you had to cut my salary, I couldn’t bring my mother here from China because I couldn’t afford to.” And that was like a really gut-wrenching experience because I felt like I had failed him. And we both sat in a room and cried or cried or just, like, we’re really sad together and I was like, “Look, we’re going to work this out.” And so fast forward, we did work it out. We brought his mother to New York from China and things worked out, but those were some very, very tough times. It was really gut-wrenching those conversations to have people had their personal lives impacted based on the struggles of the business at the time.
Andrew: What was happening at 2014 that caused all this mayhem? And then we’ll talk about how you got out of it.
Zack: Mainly, just . . . I mean, we just didn’t have enough traction to close on the revenue . . . like, to close on the financing that we needed to keep the business growing, and so it was a really tough time. It was just like, running out of money, so I was like, “Okay. I’m going to balance and keep putting money into the business along with the fact that I need to feed myself.” And so that was a struggle.
Andrew: And this is back when you were really just a fan site and before you discovered this new product with the widgets and advertising, right?
Zack: That’s right.
Andrew: Okay, got it. And then you figure that out. You also said, “You know, I need to think about hiring better.” I looked over your head before we even started, the first thing I saw before I even saw your face was “Unconditional empathy.” Why does it say “Unconditional empathy” so clearly at the top of your wall in your office?
Zack: So, we have four core values and unconditional empathy is one of them, and it’s one of the things that we look for in people and make sure when we’re hiring that they have unconditional empathy. So, no matter what they’re going through or what challenges they’re facing, they’re going to build relationships on kindness and respect and they don’t care about the other people that they are dealing with. And so if somebody can be the greatest engineer in the world or the greatest salesperson in the world, if they don’t have empathy, we don’t want them a part of our business.
Andrew: What are the others, the other three? And I’m on your careers page, so I can pull them up, but I think it’s better coming from you.
Zack: Sleeves up. So, sleeves up means we look for people who really like to get their hands dirty, they approach work in an ego-less fashion, they like to work collaboratively, 100% viewability, and that means we look . . . Like, every quarter I share the P&L of the entire business with everybody in the company. So two years ago when we were burning cash, I do that now that we’re profitable and making money every month. I go over expenses. Like, transparency builds trust.
And then secondly, we really look for people that feel comfortable giving two-way feedback, people who feel comfortable giving their manager constructive feedback or the executive team or me constructive feedback and they’re like, “Hey, Zack, you’re the CEO. Why are we doing this, this and this?” And that’s not discouraged, that’s encouraged. And a lot of people coming from like a political corporate environment have trouble adjusting for that. So, we look to like, really vet that out because they come from a place where like, “If I suck up to my boss and I say really nice things, I’m going to get . . . ” Here, that’s not how it works. Like, somebody could say a million nice things to me, that’s not improving their career. We want people who will challenge each other’s thinking and that’s going to help us make the best decisions.
Andrew: Well, how do you tell that someone can do that in an interview? Do push them by saying something rude about them? Like, this tie is just wrong for our culture. What are you doing wearing a tie?
Zack: Really look for if they like when I’m talking about our process and we say like, “If they correct any of that,” and they’re like, “Why do you do that?” or, “Why do you do that?” And that’s always a great sign when somebody is like, “Wait, why are you doing it this way?” as opposed to just be like, “Oh, that’s great,” because like nothing we do is all just great.
Andrew: And then the final one is “Be defiantly great.” What’s an example of how you guys as a company are defiantly great?
Zack: Our whole leadership team every quarter, we all read a new book and we push everybody in the company to and we look to take action items from that and implement them across the org. We like to send people to conferences to learn new things, present them. We want people who don’t want to just like, have a 9:00 to 5:00 gig, they want to have an amazing career, they want to learn, they want to grow, they want to level up and they’re really curious. And they don’t, like, accept things like where people say, “Well, that is what it is because that’s it.” We want people to be like, “No, no, that’s bullshit. Why is it like that way? Let’s fix it.” They leave things better than when they encounter them.
Andrew: When you look at the things you’ve created, the new products at the company, what’s one that’s just would make you feel so proud that you can say, “We are defiantly great. We’re doing the things that other people couldn’t create, would think are impossible”?
Zack: Well, I think one of the things is we connected the engagement of our product with a point system and a reward system so that like, literally it’s a win-win-win. Readers are happy, they engage, they win points, they redeem for rewards. The publishers are happy because they generate more revenue and more engagement or audience insights. And the brands are happy because they have a good positive brand experience and they’re collecting a lot of data. So, that’s, I think, what I’m probably most proud of in terms of product-wise.
Andrew: Yeah. It’s so interesting as I’m watching the change over the years of what people are saying about the company. It goes from like, very little stuff to then here’s one from a couple of years ago on Quora, “Is Insticator a legit company and does it work?” And I liked that someone on your team jumped in and responded to it and someone else, I guess, came in and responded also. To suddenly you went to, “Here’s how much money this company is raising and they’re just clear winners.”
It’s almost like all the challenges of the past were wiped out. Like this one article about you in TechCrunch from two years ago by Anthony Ha just makes you feel like this company figured it out from the beginning and it all just made sense. What did you do to take control of the way that people talk about you? I feel like you finally have nailed what you’re about but also nailed how you talk about it.
Zack: I think the biggest thing is just . . . Well, we fixed all of our internal challenges and made the company . . . We turned the company into a really positive cultural environment, and then like, product got a lot better as a result. And if you build a great culture and a place where people want to work, you can have A-players and A-talent. And if you have A-players and A-talent, your product can be great and your sales can be great. And the only thing that really matters in business is your people. I know it sounds like cliché and like, salesy to say, but it’s really true. Like, if you have great people, you can do wonderful things.
Andrew: What about . . . Did you PR better in some way? Are you doing more outreach?
Zack: Yeah, but I really wouldn’t think that that was what it came from. I think when we started, our product started driving even more value for customers and that got us a lot more positive exposure and that also brought us in better like, candidates and better talent, all those things, I think it was less like . . . I think our PR has naturally gotten better, but I think it had to do with more of just like our product and our team improved a lot.
Andrew: Right. A big part of it is improving culture. Let’s close on this. How did you figure out what your culture was? To come up with four items is actually not as easy as it seems when you look at it. What did you do to figure out what your core principles, what your culture is about?
Zack: It was like a whole day and a half process of like listening out what are all the things that I think are true, not like aspirational. And we have like a . . . brought in a great executive coach who threw in some ideas about this. But if we put the values as something aspirational but wasn’t true, people weren’t going to believe and be like, “That’s bullshit. They just have that up on the wall.” Like, a lot of companies do. I wanted our core values to be things and be like, “Oh, no, that’s real. People live by that.”
And we integrated core values into our performance reviews and our hiring process, and so it was like a whole day process of like, “Here’s what’s true about us. Here’s what’s not true about us. What are the things we’re really great or really true about us?” and like did word associations and distillations down, and then like, narrowed it down and then got close with about 10 and then nixed those off and so on.
Andrew: Yeah. I always thought it’s, “Here’s who we want to be. Now let’s work to get there.” And what I’ve discovered through my interviews is that culture is better when we say, “What do we believe that’s working? Who are we now that we want to highlight and reward?” You know what? I have one other question. I keep . . . As you’re talking I keep doing research. I saw a form D filing from the SEC about your company and your name was on it and Selig Zises was on it. And then I typed in his, I said, “Who is this guy?” And there’s an article about how he sold his apartment. Like, who gets an article written about them when they sell their apartment? Who is this guy?
Zack: He’s one of our board members, one of our first investor, super supportive, really brilliant, smart businessman, like a mentor to me for a very long time, founded a company in the ’80s called Integrated Resources and built that to a business that had $25 billion in assets. Seed invested in multiple tech companies from like StreetEasy, the New York real estate listing site, to Songza. And he’s been, I think, instrumental in our success as a business.
Andrew: How do you get to a guy like that? Look at this beautiful freaking apartment. In Manhattan, it looks like this. This is an old article. This is not some place that he’s lived in a long time. But how do you even get connected to him?
Zack: Through a lot and a lot of networking. I met him probably . . . So, a lot of people . . . This ties into the raising money part. People don’t invest . . . People invest with me a lot of times also. So, we had a relationship for six or seven years and I was telling him about . . . I met him through the city actually through a friend. And I was talking about our business and the relationship really developed over a number of years. And then from there, things started to become very positive when he got involved in the company and he got . . . He was really making a bet on me I think personally at the time rather than our product or what we were looking to do.
Andrew: I’m so glad to have met you. I did a lot of research. I feel like talking to you just . . . You make it easy because even from the beginning you let me speak my mind in a way that makes the conversation really good. I don’t know if that’s a natural thing that you do or if it’s just something that you learn, but it makes the conversation and makes the interview really good and I appreciate you for doing that.
All right. For anyone who wants to go read more about the website or read more about Zack and his website, it’s insticator.com. I like that you have a unique name. It makes it really easy to search for you and look it up. I want to thank the two sponsors who made this interview happen. The first will host your website right. It’s called HostGator. Check them out at hostgator.com/mixergy. I’m really grateful to them for constantly supporting what I’m doing here. And the second will do your email marketing right. Zack, you got to check them out. It’s activecampaign.com/mixergy.
And finally for us, getting culture right was really challenging. I interviewed this guy who showed me his process of how to do it. We’ve been using it here at Mixergy. He’s a guy who he hated his company, figured out how to do culture right, took it from a few million dollars which was kind of blah to over 100 million, sold the business and now just has all these photos of how exciting it was to work at his company. I invited him here to talk about how he did it and we did a course on it. If anyone wants to go check that out, it’s at mixergy.com/scott. I cannot stop talking about him. Mixergy.com/scott. Zack, thanks so much for doing this.
Zack: Awesome. Thanks a lot, Andrew. Great to be here. Have a good one.
Andrew: Same here. Bye. Good evening.